DBS Multiplier Account: A Closer Look

No doubt you’ve been seeing ads recently by DBS, involving a well-groomed man (presumably rich) who is surrounded with lots of bunnies. In the ad, he talks about the new DBS Multiplier Account where the more one transacts on the account, the more one multiplies his/her money. Besides the “aww” factor, the rabbits double as a metaphor for multiplication.

There are three value propositions in the advertisement for the account:

no minimum salary credit (hurray)

no minimum credit card spending (no way)

one can earn up to 3.5% (omg)

Of course, the last value proposition is seemingly the most impressive one and many blogs have extolled the benefits of the account. We here at fundMyLife are a curious bunch so we took a closer look at it and see what the fuzz is all about.

The Interest Table

The interest table shown on the website, with numbers added on the left side to number the various tiers. Figure adapted from DBS and modified for clarity.

With reference to the table above, we see six different tiers of interest rates, with two separate sets of interest rates depending on how many components of your money are transacted (thereon known as 1-cat and 2-cat for transactions involving 1 and 2 categories respectively).

fundMyLife Does the Maths

Obviously, the more you transact the higher the interest rate is. At the lowest, it’s 0.05% for both sets. However, as you transact higher amounts, the difference between 1-cat and 2-cat becomes more apparent. Obviously, the purpose is to encourage you to perform 2 or more categories of transactions with DBS.

An interest-ing (geddit?) point to note is that the jumps in rates are quite uneven. More specifically, the jumps between Tier 1 and Tier 2 and between Tier 5 and Tier 6 are very dramatic.

A chart that shows the increase in interest rates between one tier and the next tier. Black bars show the tiers in 1-cat and red bars show the tiers in 2-cat.

To illustrate this point, we calculate the difference in interest rates between tiers. Not surprisingly, the difference between the first two tiers is staggering – by transacting between $2,000 to $2,499/month (Tier 2), you enjoy 1.5 and 1.75% more interest rate for 1-cat and 2-cat respectively than if you had transacted $1,999/month and below (Tier 1).

As mentioned, the 3.50% is the last tier (Tier 6) and it is only when you transact a total of $30,000/month across 2 categories. It’s also a huge jump from Tier 5 for 2-cat, where it’s a 1.2% increase. On the other hand, if you transacted $30,000/month across only one category, i.e. 1-cat, the maximum interest rate you’d get is 2.08% and is only a 0.08% increase from the previous tier.

$30,000/month transaction to reach the 3.5%!

What if you transacted between $15,000 to $29,999/month with 3 categories (Tier 5)? You’d get 2.3%, which is only a 0.1% increase from the previous tier (Tier 4). The difference between tiers for both 1-cat and 2-cat seems to be very little in between.

A chart that illustrates the difference between 1-cat and 2-cat for each tier. As mentioned, there is no difference between the two sets in Tier-1.

We also looked at the difference in interest rates between 1-cat and 2-cat for each tier, and it is the largest for Tier 6. On the other hand, the consumer does not benefit too much from making the switch from 1-cat to 2-cat in most tiers.

Transaction Amount to Cross Tiers

We also observed something interesting as well in the table. If you haven’t noticed it yet, the range in the amount of transaction increases across tiers as well.

A chart that illustrates the transaction range for each tier. Tier 1 has no range because it has no minimum whereas Tier 6 is not shown because it has no maximum.

Simply put, the transaction gap increases as you move from the first tier to the last. It also means it’s relatively challenging to cross over to the next tier from your current tier.

Fur real? What does it mean?

Given the irregular distribution of interest rate increase, we think that it’s meant to capture two very specific demographics – the ones in the first two tiers and the ones in the last tier. One very good thing that we note is that there is no minimum amount required in the account which means students, fresh graduates, and young working professionals will benefit from a decent interest rate, i.e. 2% for 2-cat. The account also rewards consistency so those who with low risk appetites can benefit from this. Those who do not mind transacting everything under DBS, e.g., loans, credit cards, insurance, should give it a go as well.

The DBS Multiplier Account will also benefit big ballers who can afford to transact $30,000/month and yet still have enough savings in the account to reap the benefits of the increased interest rate.

That said, for someone who can afford to transact $30,000/month, we think that person can afford better financial instruments to grow his wealth anyways. 3.5% as a form of interest rate is nothing to scoff at…if one doesn’t mind committing all that money with one financial institution. Moreover, it’s for the first $50,000 in the account.

We don’t love it, but we don’t hate it either. Its low requirements and flexibility to combine different categories are refreshing additions to their competitors’ tiered interest rate type of savings accounts (we’re looking at you guys, OCBC 360).

Our Verdict

Pros:

no minimum amount in account

no minimum credit card spending

flexible combinations

Cons:

interest rates apply only to the first $50,000 in the account

challenging to reach the 3.50% interest rate as advertised

once you’re stuck in one tier it’s challenging to move to the next one

Conclusion: You need to commit your money with DBS Multiplier Account to reap the most reasonably tiered benefit. Also, you’ll need to transact >$2000/month to obtain a meaningful interest rate.

That’s All Folks!

We hop this article helped you make an informed choice before leaping into signing up for the DBS Multiplier Account. If you want to know more about personal finance and would like to ask questions, head on over to our main site and ask away!

fundMyLife is a platform that aims to empower the average Singaporean to make financial decisions confidently. We intelligently connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions. Follow us on our Facebook page to get exciting updates and your dose of finance knowledge! Let us know what you want to know about finances or something that you wish your friends knew!

Written by Winifred Tan, edited by Jackie Tan. Winifred is a part of fundMyLife, the platform that connects financial planning questions to the right advisers.

What can you do with your paycheck? What about Financial Freedom?

Whether you are reading this from the confines of your office or the comfort of your home, one thing is clear: you have cleared the dreaded years of ‘coffee mugging’ during your JC, Polytechnic or University days, and are finally earning your own keeps. For that, you deserve a pat on your back! Some graduates call this ‘financial freedom’. But truth to be told (being a graduate myself as well) – financial freedom is certainly NOT about liberating oneself from parental allowances! Read on to find out more about what does it really mean to be financially free.

For the ladies, the paycheck is a conduit to derive an artificial high from shopping for more clothes, new (branded) bags and accessories. For the men, saving for big‐ticket items like a car or a branded watch may be in the books. Whatever the case may be, there is no crime in pampering yourself with that extra Chanel Timeless Classic or going for a good holiday in Europe.

However, money is multi‐functional, and the real timeless classic “saving for a rainy days” still rings true.

Take time to ponder over this quote and how it can apply to your life

Infant Steps to Wealth Accumulation

There are a myriad ways to kick‐start a good financial planning strategy for yourself, and your loved ones. No right or wrong way per se, because at the end of the day, it boils down to the end‐product of wealth accumulation and what your initial targets you’ve wanted to achieve.

1. The first thing you should do is put aside three to six months’ of your pay as emergency fund, as I’ve always reminded my clients and prospects who have met me before. This is to ensure that in the event of some family emergency, you can take a hiatus from work without having to worry about the basic necessities for the next couple of months.

2. Accompanying this, you should also look into pledging part of your paycheck into contingency assets, i.e. insurance. Some people do not believe in insurance. Yet, insurance is not a religion or faith, it is a simple financial instrument which guarantees some lump sum (for example $100,000…the payout varies of course) and income replacement, should you meet with some unfortunate incident e.g., death/accident/critical illness. People who take up such plans do care about their families and loved ones enough to ensure that this risk of kicking the premature bucket is well‐hedged against, and to ensure they take responsibility of these risks are borne by themselves so as not to burden their loved ones.

More importantly, you may be making regular savings of up to $1,000 per month (or more). That translates to $12,000 per year, and eventually more than $120,000 after 10 years after taking into account accumulated interest/bonuses declared year-on-year. You would not want any part of this $120,000 to go into paying for hospital or other unforeseen bills. Many graduates do not recognise that they are taking over the mantle of breadwinner from their parents. They are, and will continue to be, the economic life‐force of their families in years to come. Hedging risks then, becomes more than necessary.

3. The next step is saving and investing for your future. These days, society has evolved and women are now becoming more empowered, financial savvy and independent. With the power of compounded interest over time, those who start young (i.e. graduates in their 20s) are prime candidates to grow and accumulate massive wealth by the time they retire. Most of them just don’t do it early enough.

Employing the services of reliable financial professionals to do the job is definitely encouraged, i.e. consulting your advisor/planner, as it frees up your precious time to do other things and develop your skills in your speciality, instead of spending hours everyday pouring over financial news and worrying over the stock market. It is for that reason why people hire lawyers for their professional services as well.

So now, you could be wondering: “It’s time for me to start something! Tell me how!”

A word of warning before I begin: it is going to be technical (it is still somewhat a science, although I mentioned “art of planning”!), and it’s going to be very general. The Art of Planning is still specific to the needs and wants of every individual.

Ideally, you should be spending a maximum of 40% to 50% of your monthly paycheck on fixed and variable spending (food, transport, bills, entertainment, shopping, etc.).

The remaining amount (50‐60%) can be split into short-term (ST) and long‐term (LT) savings and investments. I’m sure my clients might find this familiar as I often re-iterate this to them. UK financial planning expert Bhupinder Anand breaks it down: Short‐term goals would include debt‐consolidation (credit‐card payments, loans) and insurance. Medium‐term goals would be mortgage loans, and savings (general/specific). Long‐term goals would be investments (general/specific), retirement planning, and long‐term care.

This would be how I actually plan for my clients, especially the fresh graduates! Talk to me more to find out how to build up your wealth management plans in-depth!

Your Road‐Map

Everyone’s road‐map is unique. What is vital is not whether yours is better than someone else’s. It is whether it is there, and whether you have committed to it diligently and make strategic modifications part-way when there are changes in your life stages. It is akin to a Personal Trainer’s (PT) strategy to help his trainee lose weight. He would have planned out an exercise regime based on the needs and physical abilities of the trainee. But, along the way, there might be situations that would call for a slight change in strategy, such as the trainee sustaining injuries or becoming ill along the way, in which the PT would have to modify the workouts a little.

Your life stages and situations may change along the way, e.g., buying a house, getting married, and only your trusted financial planner would be able to help guide you by your side, tweaking your strategy a little but still ensure your resulting goal is still achieved in the end. That is assuming your goals are still the same.

Yearly review of goals with your planner is therefore essential as it gives him/her an idea whether your road-map needs major or minor revamps. It is always important to keep your relationships close with your planner as he/she will be there for you to guide you through your life stages, and be there when claims arise.

Last words of advice

Financial pitfalls can be avoided with the Pay‐Yourself‐First method. It basically means getting your paycheck, and immediately channelling the funds to another account to save and invest, instead of saving at the end of the month with what’s left behind. Usually, your bank account would be emptied, the victim and aggressor both being yourself. Most of the times, I would advise my clients and prospects to have at least 2 bank accounts, one for spending and the other is where they should channel their salary in a save up. Transfer only a fixed amount of funds to your spending account every month. An alternative method would be to transfer funds from the “savings/salary” account to your spending account when the spending account runs low.

So, play hard with your money, but make your money work harder. You’ll live to enjoy it more.

If you have any questions to ask me, I’m happy to answer them over at fundMyLife!

fundMyLife is a platform that aims to empower the average Singaporean to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions. Follow us on our Facebook page to get exciting updates and your dose of finance knowledge! Let us know what you want to know about finances or something that you wish your friends knew!